Condo sales, building tepid
Inventory exceeds demand, analysts say
By Jenny Burns
The Sun News
Condominium developers are reacting to a softening market by slowing condo building in Horry County, N.C. - reversing a three-year trend. Single-family building continues to climb.
The number of condo building permits dropped 34 percent in the second quarter to 724 from 1,105 last year, while new condo sales fell 31 percent. Resale condo sales fell 26 percent, according to Market Opportunity Research Enterprises, a regional real estate market research firm in Rocky Mount, N.C.
The slowing sales mean better prices for buyers, and more incentives from builders to sell units.
The sales slowdown is showing up in Brunswick County, N.C., and Georgetown County as well.
"We don't see this as an extended downturn. Although it seems sharp right now, it is sharp only in the very short term as builders try to adjust from the excess of their starts late last year," said Bernard Helm, president of M.O.R.E, which tracks real estate markets in the Southeast.
Tom Maeser, market analyst and president of the Fortune Academy of Real Estate, said he has gotten many calls from developers concerned about the growing condo inventory on the market, which is triple what it was last year.
Maeser said condo developers are cutting back, often because they may have trouble getting the 80 to 100 percent presales that the bank requires for a construction loan.
The single family market is still going strong. Single family building increased 7 percent over last year to 1,535 from 1,433 even though new home sales stayed flat and resale homes fell six percent. Analysts say this could signal future softening in the single family market.
"Builders will have some excess inventory, and that will end up being good news for consumers. They have to work out that inventory and that means softening prices," Helm said.
The drop in resales and flat growth in new home sales - at 980 homes this year and last - signals new home sales may move into negative territory in the future, Helm said. An 11 percent drop in single family lot sales also signals a future drop in sales, he said.
Lawrence Langdale, vice president of Coldwell Banker Chicora Development, said he expects the single family market will remain strong while the condo market will take 18 to 24 months to adjust. He said the drop in single family lots is attributed to loss of investors in the market, since lots, like condos, are more often purchased by investment buyers.
Maeser said it's a good sign if home sales can stay on target with 2005's record sales - as it has done so far. He said the flat growth in new home sales indicates builders are being careful to stay even with last year and not build too many spec homes.
"They don't want to get stuck with a lot of inventory out there," Maeser said.
Brunswick County did not see the sales downturn that Horry County had in the first quarter, but sales in the nation's 28th fastest-growing county did drop in the second quarter.
"It means that the Brunswick market is not quite as volatile," Helm said.
New single family home sales in Brunswick dropped 7 percent to 471 from 506 and resales dropped 24 percent to 820 from 1,078. Single family lot sales also dropped 36 percent to 2,084 from 3,257.
Helm attributes the drop to rising interest rates on adjustable rate mortgages, making it difficult for buyers to purchase a second home. Helm said the Brunswick market is less volatile because it has fewer national builders than Horry County. Brunswick is also seeing a downturn in building condos and single family homes, but townhome building has picked up.
"It's doing a leveling off. We're also seeing county permitting leveling off," said David Sandifer, owner of Holden Beach Properties and Brunswick commissioners chairman. "I think we will see another spurt but this is just a lull."
Sandifer said the high end market in Brunswick is selling well, but there's a lack of moderate income housing. Townhome building is also up in Horry County. Langdale says builders are choosing townhomes and single family for future projects because they are more often purchased by primary homeowners.
Helm said the townhome market has strong demand on the Strand, but it can be easily overbuilt because it's a smaller market than the condo and single family markets.
In Georgetown County, resale homes have declined slightly but new home sales are up 60 percent to 104 from 65. New condo sales are also up from 45 to 151. "Georgetown County is getting ready to do what Horry County has already done. It's good on new but has problems in resales. The decline will happen in new home sales," Helm said. Single family building and lot sales have also dropped off in Georgetown County.
Prices in all three counties continue to show year-over-year increases.
The median price for homes and condos in Horry County increased 16 percent to $189,900 from $162,900.